New Zealand-European Union trade agreement: Meat industry 'deeply disappointed', Damien O'Connor says it's 'high quality'

New Zealand's meat industry is "deeply disappointed" with the landmark free trade agreement (FTA) secured overnight with the European Union.

Trade Minister Damien O'Connor has conceded that "of course we didn't get everything that people wanted", but he believes it's still a "high quality deal" that "opens up huge opportunities".

After years of negotiations that went right down to the wire, Prime Minister Jacinda Ardern early on Friday morning confirmed New Zealand has secured an FTA with the EU, an incredibly complex market given it covers access to 27 European countries. Both Ardern and O'Connor are in Brussels, where they have been part of the final talks.

Some of the headline gains promoted by the Government include that export revenue to the EU is expected to grow by up to $1.8 billion annually once the deal has been fully implemented, that exporters will save about $110 million per annum due to tariff elimination, and that tariffs are gone immediately for the likes of kiwifruit, onions, and mānuka honey.

But the meat industry is feeling hard done by. Agriculture was always thought to be a key sticking point in negotiations due to the EU's protectionism over the market.

O'Connor said the Government "fought hard" for dairy and beef exporters and said the deal could bring about $600 million in additional export revenue once the agreement is fully in effect.

"We've secured an eight-fold increase in the volume of beef we can export into the EU," the minister said. "We have also secured improved access for our butter and cheese producers, some of which will now be able to trade with the EU for the first time in many years."

Duty-free access to the EU will also be expanded for sheep meat.

The quota for beef is expanding under the deal. A quota is the volume of access into a market to which a preferential tariff applies.

Currently, the Government says New Zealand has a quota of 1102 metric tonnes of beef into the EU market with a tariff of 20 percent. This will fall to 7.5 percent on day one of the deal coming into effect, with the quota growing to 3333 tonnes immediately and then to 10,000 tonnes seven years after the agreement is signed.

But Sirma Karapeeva, the chief executive of the Meat Industry Association (MIA) said this is very small in a market that consumes 6.5 million tonnes of beef annually. The read meat sector is "deeply disappointed and concerned" at the deal which it believes will "put us at a disadvantage", a statement said.

"We have been clear from the outset that what we need from an EU-NZ Free Trade Agreement is market access that allows for future growth and opportunity," said Karapeeva.

"Unfortunately, this outcome maintains small quotas that will continue to constrain our companies' ability to export to the EU. This agreement is not consistent with our expectations and the promise for an ambitious, high quality trade deal."

Sam McIvor, the chief executive of Beef + Lamb who is also in Brussels, echoed that on AM on Friday morning. He said he wasn't expecting access to grow further anytime soon.

"I think what we know with the EU is that the EU doesn't give you anything more in the future," he said. "What you get is what you get."

"I have to say the EU has been very disappointing in this negotiation. They talk about values. They talk about commitment to climate change, environment, animal welfare. But absolutely when it comes to free trade, they talk a big game on that as well. But the reality has just not followed that."

The Dairy Companies Association of New Zealand (DCANZ) also expressed disappointment, saying the EU market remains 98.5 percent closed to Kiwi dairy products. It says remaining in-quota tariffs and quota administration will restrain competitive opportunities.

"This is a considerable missed opportunity for the New Zealand economy as a whole when considering that dairy accounts for 28 percent of NZ exports and has been a pillar of resilience for the economy through COVID," said chairman Malcolm Bailey.

Prime Minister Jacinda Ardern and European Commission President Ursula von der Leyen.
Prime Minister Jacinda Ardern and European Commission President Ursula von der Leyen. Photo credit: Getty Images.

But O'Connor, also speaking to AM on Friday, said feedback had been "very, very good" from most sectors.

"Obviously we've heard some comments from a couple who are disappointed with the volumes that they get access to far better access than they have had. We can work on that. We say to them, work with us, continue to build opportunities. From a zero base on most dairy products we've opened up opportunities for butter, for cheese, for milk powders."

He pointed to butter as one of the key winners from the deal. It's had a quota of 47,177 tonnes, but due to a high in-quota tariff and administrative conditions, it's essentially not been used by New Zealand for the past five years. But there will be improved access for butter under the FTA, he said.

"The reality here in Europe, as many would understand, it's quite a challenging situation here, geopolitically, with a change of governments, growing pressure on food security, and for them, that doesn't mean opening the borders, for them, many of them it means closing the borders.

"So actually, this is the best opportunity we've had and the best deal that we can get for a very long time. Of course we didn't get everything that people wanted, but that's a trade negotiation."

While there won't be an opportunity to alter the deal in the immediate future, the minister said there "are reviews and upgrades of many trade agreements over time".

"We've got to see the exporters fill the opportunities that we've negotiated now before we start asking for more and that was a point made by the Europeans to us."

Increased access across a range of products under the FTA will add "hundreds of millions of dollars of value directly back to New Zealand exporters," O'Connor said.

"In the services people can come into the market here, a huge market, and invest in services. They are providing architecture, providing environmental services, all these things will be easier to conduct in a quite a sophisticated challenging market made a lot easier by this trade agreement."

Prime Minister Ardern called the deal "strategically important and economically beneficial".

"It delivers tangible gains for exporters into a restrictive agricultural market. It cuts costs and red tape for exporters and opens up new high value market opportunities and increases our economic resilience through diversifying the markets that we can more freely export into."

Ursula von der Leyen, the President of the European Commission, told reporters on Friday morning that it was a "modern and solid" deal.

"Our farmers on both sides will benefit and they will benefit way beyond tariff cuts because we will work together on sustainable food systems."

The EU is New Zealand's fourth-largest trading partner, with two-way goods and services worth $17.5 billion in the year to December 2021.